Won Posts Fastest Monthly Gain Since 2009 Amid Dollar Supply Surge

The South Korean won posted its fastest monthly appreciation against the US dollar since March 2009, driven by a surge in dollar supply and export sector dollar selling. The easing of the dollar supply imbalance combined with the Bank of Korea's interest rate hike narrowing the Korea-US rate gap has fueled speculation that the won-dollar rate could break below 1,400 won.

The won-dollar rate closed at 1,424.0 won on Friday, down 125.4 won from end-June. This is the largest monthly decline since March 2009 when the rate fell 150.5 won during the global financial crisis.

The rate surged as high as 1,559.2 won intraday on July 1 but dropped to a low of 1,418.0 won on Thursday before finishing at 1,424.0 won on Friday.

Analysts predict that the won-dollar rate could fall below 1,400 won in the second half of the year. KB Kookmin Bank economist Lee Min-hyuk estimates the fair-value range for the won to be between 1,410 and 1,420 won, citing South Korea's sound economic fundamentals.